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US Economy Shows Acceleration with Strong Consumer Spending and Job Numbers

April 7, 2024 | by stockcoin.net

us-economy-shows-acceleration-with-strong-consumer-spending-and-job-numbers
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The US economy is experiencing an acceleration, fueled by robust consumer spending and impressive job numbers, which are pushing GDP growth estimates to 2.5% or even higher. Despite the rising interest rates, stocks continue to rally on positive news regarding earnings and dividends. Long-term returns are primarily attributed to dividends and earnings, with a staggering 97% of returns being explained by these factors since 1871 and 1991. Additionally, inflation is gradually decreasing, and with high levels of productivity, there is a potential for further acceleration of GDP growth to 3.8% in the upcoming year. The VFLO ETF offers investors a compelling combination of deep value, quality, and growth, with an attractive valuation at 7X cash-adjusted earnings and a remarkable 30% rally in the past nine months. Moreover, the market is influenced by various factors such as the quarterly Master List update for fundamentals and the performance of the ZEUS Family Fund, which displays a path of total return potential justified by solid fundamentals. Overall, the US stock market exhibits increasing PEs, driven by factors like the surge of retail investors, the introduction of 401Ks, foreign investor interest, and the dominance of big tech companies. Valuation metrics should be evaluated within the context of longer-term time frames, as returns have proved statistically significant over 10 to 30 years, ranging from 90% to 97%. When looking at the enterprise value/cash flow metric, the market is just slightly overvalued, with the S&P’s EV/EBITDA indicating a mere 4.41% overvaluation. Positive factors for the market include the S&P’s growth estimate of 12%, as well as the FactSet bottom-up consensus estimate of 12.5% EPS growth. The jobs report reveals strong job growth, particularly in the construction sector, and a recovering housing market. Non-supervisory wages are also on the rise, witnessing an annual growth rate of 4.25%, surpassing overall wage growth. The three-month rolling average for job growth supports a positive trend in job creation.

US Economy Shows Acceleration with Strong Consumer Spending and Job Numbers

Accelerating Economy

The economy is experiencing an acceleration, thanks to strong consumer expenditures and job numbers. These factors are driving GDP growth estimates to 2.5% or even higher. Consumer spending plays a crucial role in economic growth, and with increased expenditures, the economy is poised for expansion. As consumers have more disposable income, they are more likely to spend on goods and services, thus boosting overall economic activity. Additionally, job numbers contribute significantly to the acceleration of the economy. A robust job market not only improves consumer confidence but also leads to increased consumer spending, further stimulating economic growth.

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Stock Market Performance

Despite the rising interest rates, the stock market continues to rally. This performance can be attributed to positive news surrounding earnings and dividends. Investors are optimistic about the financial performance of companies, leading to positive expectations for future earnings. Additionally, dividend payments provide investors with a steady income stream and attract more investors to the market. With positive news on both earnings and dividends, investors are confident in the stock market’s potential for growth, leading to a continued rally.

US Economy Shows Acceleration with Strong Consumer Spending and Job Numbers

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Long-Term Returns

When analyzing long-term returns, dividends and earnings are the major drivers. Since 1871 and 1991, a remarkable 97% of returns can be explained by these factors. This highlights the importance of companies’ financial performance in determining long-term investment success. Dividends reflect a company’s profitability and its commitment to sharing its earnings with shareholders. Earnings growth indicates the company’s ability to generate sustainable profits over time. Investors who focus on these fundamental drivers of long-term returns are more likely to achieve consistent and satisfactory results.

Inflation and GDP Growth

Inflation has been gradually decreasing, which bodes well for the economy. A low inflation rate is a positive sign as it indicates that prices are relatively stable, allowing consumers to have greater purchasing power. When inflation is high, the value of money decreases, and it becomes more challenging for consumers to afford goods and services. However, with low and stable inflation, consumers can make confident spending decisions, contributing to economic growth. Moreover, high productivity levels are expected to further accelerate GDP growth to an estimated 3.8% in the coming year. Increased productivity allows for greater output with fewer resources, ultimately leading to improved economic performance.

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US Economy Shows Acceleration with Strong Consumer Spending and Job Numbers

VFLO ETF

The VFLO ETF offers investors a unique combination of deep value, quality, and growth in an optimal package. Over the past nine months, the VFLO ETF has experienced a remarkable 30% rally, signaling its attractiveness to investors. The ETF’s attractive valuation at 7X cash-adjusted earnings (0.7 PEG) further strengthens its appeal. Deep value investments are stocks that are deemed to be undervalued, presenting investors with an opportunity for potential future growth. Quality investments are those that exhibit strong financial fundamentals and are less susceptible to market volatility. By combining both deep value and quality, the VFLO ETF provides investors with a well-rounded investment option that maximizes potential returns.

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Factors Impacting the Market

The quarterly Master List update for fundamentals is an essential factor impacting the market. This update provides investors with updated information on various fundamentals, such as earnings, dividends, and financial ratios, enabling them to make informed investment decisions. Staying up to date with changes in these fundamentals is crucial for investors to stay ahead in the market. Additionally, the performance of the ZEUS Family Fund plays a role in impacting the market. This fund follows a path of fundamentally justified total return potential, meaning that its performance is based on solid financial principles. Tracking the performance of such funds can provide insights into the overall health of the market.

US Economy Shows Acceleration with Strong Consumer Spending and Job Numbers

Rise of US Stock Market

Several factors have contributed to the rise of US stock market price-to-earnings ratios (PEs). The introduction of 401Ks, retirement savings accounts that offer tax advantages, has encouraged more individuals to become retail investors. This influx of individual investors has increased demand for stocks, driving up prices. Additionally, foreign investor interest in the US stock market has also been a significant driver. The stability and growth potential of the US economy attract foreign investors, further pushing up stock prices. Furthermore, the dominance of big tech companies in the US stock market has played a crucial role in driving up PEs. These tech giants consistently deliver strong earnings and have become vital components of investors’ portfolios.

Valuation Metrics

When assessing valuation metrics, it is crucial to consider longer-term time frames rather than short-term fluctuations. Valuation metrics, such as the Shiller PE, PE, book value, and dividend yield, provide valuable insights into a company’s worth. However, these metrics should not be relied upon solely for short-term investment decisions. Historical data shows that returns are statistically significant, ranging from 90% to 97% over a period of 10 to 30 years. This indicates that taking a longer-term perspective when evaluating valuation metrics can lead to more accurate assessments of a company’s value and potential for future growth.

US Economy Shows Acceleration with Strong Consumer Spending and Job Numbers

Market Valuation

Despite concerns about overvaluation, a closer look at enterprise value to cash flow metrics shows that the market is barely overvalued. Enterprise value to cash flow is a reliable metric that takes into account a company’s overall value and its ability to generate cash flow. According to S&P’s EV/EBITDA metric, the market indicates only a 4.41% overvaluation. This suggests that while some sectors or individual stocks may be overvalued, the overall market remains relatively balanced when considering this metric. It is important to look beyond general perceptions of overvaluation and conduct a more comprehensive analysis to assess the true value of the market.

Positive Trend in Job Creation

The jobs report indicates a positive trend in job creation, with the three-month rolling average for job growth consistently trending higher. This shows that the economy is experiencing sustained job growth, which is a positive sign for overall economic health. Construction jobs, in particular, have been leading the way, indicating a robust housing market and increased demand for infrastructure projects. Additionally, non-supervisory wages have also been growing, with an annual wage growth of 4.25%. This growth in wages contributes to increased consumer spending power and further supports the acceleration of the economy. Weekly earnings have even exceeded overall wage growth, highlighting the positive trend in job creation and its impact on workers’ financial well-being.

In conclusion, the economy is experiencing an acceleration driven by strong consumer expenditures and job numbers. Despite rising interest rates, the stock market continues to rally on positive news surrounding earnings and dividends. Long-term returns are primarily driven by dividends and earnings, with historical data showing their significant contribution to investment success. Gradually decreasing inflation and high productivity levels are favorable factors that contribute to GDP growth acceleration. The VFLO ETF offers a unique combination of value, quality, and growth, making it an attractive investment option. Various factors, including quarterly updates for fundamentals and the performance of funds, impact the market. US stock market PEs have been rising due to factors such as the rise of retail investors, the introduction of 401Ks, foreign investor interest, and the dominance of big tech companies. Valuation metrics should be viewed in longer-term time frames, and a comprehensive analysis shows that the market is barely overvalued when considering enterprise value to cash flow. Lastly, there is a positive trend in job creation, with construction jobs leading the way and non-supervisory wages seeing significant growth. Overall, these factors contribute to a thriving and promising economic outlook.

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